[Federal Register Volume 63, Number 37 (Wednesday, February 25, 1998)]
[Rules and Regulations]
[Pages 9413-9417]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-4711]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 249
[Release No. 34-39677]
Commission Requirements for Registration Under Section 15 of the
Exchange Act
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
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SUMMARY: The Securities and Exchange Commission is adopting Interim
Form BD for the registration of brokers and dealers under the
Securities Exchange Act of 1934. The Interim Form is intended to
enhance the ability of the public to obtain information regarding
securities professionals until the redesigned CRD system is
operational.
EFFECTIVE DATE: March 16, 1998.
FOR FURTHER INFORMATION CONTACT: Catherine McGuire, Chief Counsel, or
Paul Andrews, Special Counsel at (202) 942-0073, Office of Chief
Counsel,
[[Page 9414]]
Division of Market Regulation, Mail Stop 7-11, Securities and Exchange
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
SUPPLEMENTARY INFORMATION:
I. Background
On July 12, 1996, the Commission adopted amendments to Form
BD (``1996 Amendments''), the uniform application form for broker-
dealer registration under the Securities Exchange Act of 1934
(``Exchange Act'').\1\ In general, the amendments were adopted to
provide the Commission, self-regulatory organizations (``SROs''), and
state securities regulators with better information about a
registrant's disciplinary history; to elicit more precise information
about the business activities of broker-dealer applicants; and to
facilitate the electronic retrieval of information. At the time it
adopted these amendments, the Commission stated that use of Form BD, as
amended, was to coincide with the implementation of the redesigned
Central Registration Depository (``CRD''), a computer system operated
by the National Association of Securities Dealers, Inc. (``NASD'') that
maintains registration information regarding broker-dealers and their
registered personnel. Among other things, the redesigned CRD system
will allow broker-dealers to file Form BD electronically.\2\
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\1\ Securities Exchange Act Rel. No. 37431 (July 12, 1996), 61
FR 37357 (July 18, 1996); see also 17 CFR 249.501.
\2\ The CRD is a customized electronic database that allows
``one-stop'' filing for broker-dealer registration among the various
state and federal regulators. In 1992, the Commission began
participating in the CRD system as part of its ongoing effort to
reduce the costs associated with broker-dealer registration.
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Although the NASD expected to implement the redesigned CRD system
in September 1996, a test of the system that began in May 1996 revealed
that additional changes were needed in the software that will be used
by broker-dealers to make electronic filings. Furthermore, the NASD
determined that broker-dealers needed additional time to prepare their
internal operations and infrastructure to support electronic filings.
As a result, the NASD delayed the implementation of the redesigned CRD
system. Because of this delay, on September 4, 1996, the Commission
suspended the compliance date for the Form BD amendments.\3\ Thus,
until the redesigned CRD system is fully functional, applicants
continue to file old Form BD.
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\3\ Securities Exchange Act Rel. No. 37632 (September 4, 1996),
61 FR 47412 (September 9, 1996).
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One of the primary goals of the enhanced CRD, as well as the Form
BD as amended, is to make certain information concerning broker-dealers
and their associated persons more readily available to the public until
the CRD redesign is complete. The NASD has determined to make the
information available through a web-based technology. To do so,
however, it is necessary to reformat a segment of Form BD.
To enhance the ability of the public to obtain information
regarding securities professionals, the Commission is adopting Interim
Form BD for use by registrants until the redesigned CRD system is
operational.\4\ Interim Form BD is based on old Form BD; it requires
registrants to file information called for by the 1996 Amendments. The
information would be in a computer format that will allow the CRD to
make the information available to the public over the WorldWide Web.
The Interim Form would not change the substance of the 1996 Amendments,
but only their appearance on a temporary basis.
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\4\ At this time, that is expected to occur shortly before the
year 2000.
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II. Description of the Interim Form BD
Interim Form BD will consist of Form BD currently in use with one
exception. Old Question 7 on Form BD will be reformatted to resemble
Question 11 on the amendments to Form BD approved by the Commission in
July 1996.\5\ The NASD, through the CRD system, will then publish the
contents of Question 7 in the interim form for public access. Question
7 requests information about the disciplinary history of the applicant
and its control affiliates, including information relating to statutory
disqualifications,\6\ other relevant history, and the applicant's
financial soundness. In order to make the disclosure more organized and
complete, Question 7 is broken into broad categories: criminal, civil,
regulatory, and financial. Disclosure of such offenses as military
court convictions, perjury, and conspiracy to commit certain offenses
is also required.
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\5\ The Commission has the authority to require the filing of
Form BD pursuant to Sections 15 and 17 of the Exchange Act. 15
U.S.C. 78o and 78q.
\6\ Sections 15(b)(1), 15(b)(4) and 15(b)(6) of the Exchange Act
authorize the Commission to deny registration to a broker-dealer if
the broker-dealer or an associated person of the broker-dealer has
engaged in the activities listed in those sections, 15 U.S.C.
78o(b)(1), (b)(4), and (b)(6). See also 15 U.S.C. 78o-3(g)(2).
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III. Effective Date
In general, the Administrative Procedure Act (``APA''), 5 U.S.C.
551, et seq., requires that agency rulemaking, such as changing Form
BD, must be subject to a public notice and comment period. 5 U.S.C.
553. That requirement has already been satisfied. In Securities
Exchange Act Rel. No. 35224, 60 FR 4040 (Jan. 12, 1995), the Commission
solicited comment on what became the 1996 Amendments to Form BD. The
substance of these amendments (namely, new Question 11) will be used in
Interim Form BD. Thus, Interim Form BD is not subject to a notice and
comment period.\7\ In addition to being unnecessary, the Commission is
of the view that soliciting comment would be impractical. The proposed
Interim Form BD would only be used on a temporary basis and to delay
its implementation until after a notice and comment period would
significantly reduce its efficacy.
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\7\ Alternatively, Section 553(b)(3)(B) of the APA provides that
an agency may dispense with prior notice and comment when it finds,
for good cause, that such notice and public comment are
``impracticable, unnecessary, or contrary to the public interest.''
5 U.S.C. 533(b)(3)(B). Because Interim Form BD makes no substantive
or material change to the 1996 Amendments, and the Commission has
already solicited comment on those amendments, the Commission finds
that good cause exists such that notice and comment are unnecessary
for the adoption of Interim Form BD.
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Moreover, although the APA generally requires publication of such
amendments at least thirty days before their effective date, this
requirement does not apply if the Commission determines, for good
cause, not to provide a thirty-day period. See 5 U.S.C. 533(d). In
light of the previous notice and comment period in connection with the
Form BD amendments, as well as the fact that Interim Form BD will
provide investors with immediate and inexpensive access to the relevant
information concerning broker-dealers and their associated persons, the
Commission here finds that good cause exists such that Interim Form BD
is effective as of 16, 1998. The use of Interim Form BD is prospective
only. Registrants already registered with the Commission need not
refile on Interim Form BD.
IV. Statutory Basis
15 U.S.C. 78o, 78q, 78w.
List of Subjects in 17 CFR Part 249
Broker-Dealers, Reporting and recordkeeping requirements,
Securities.
For the reasons set forth above, the Commission hereby amends Title
17, Chapter II, part 249 of the Code of Federal Regulations as follows:
[[Page 9415]]
PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934
1. The authority citation for Part 249 continues to read in part as
follows:
Authority: 15 U.S.C. 78a, et seq., unless otherwise noted;
* * * * *
Note: Form BD does not, and the Interim Form will not, appear in
the Code of Federal Regulations.
2. By amending Form BD (referenced in Section 249.501) to revise
Question 7 to read as follows:
BILLING CODE 8010-01-P
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[GRAPHIC] [TIFF OMITTED] TR25FE98.000
[[Page 9417]]
[GRAPHIC] [TIFF OMITTED] TR25FE98.001
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By the Commission.
Dated: February 18, 1998.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-4711 Filed 2-24-98; 8:45 am]
BILLING CODE 8010-01-C
